In a new white paper, ACA International, a trade association for members of the credit and collection industry, argues that the Telephone Consumer Protection Act (TCPA) must be modernized to accurately reflect the current state of communications technologies and how those technologies are used by businesses and consumers. The white paper, "The Imperative to Modernize the TCPA: Why an Outdated Law Hurts Consumers and Encourages Abusive Lawsuits," demonstrates that the dramatic increase in TCPA litigation is a manifestation of the TCPA's outdated nature and its propensity to serve as a catalyst for frivolous lawsuits.

The white paper includes the following observations:

  • While originally designed to protect consumers from the harassment of telemarketing calls, the TCPA has increasingly been applied to nonsolicitation communications across a diverse range of industries, thereby placing a spectrum of nontelemarketing businesses at risk of lawsuits for engaging in a variety of legitimate business-related communications if the incorrect consumer is inadvertently contacted. Examples of such communications include reminders for bill due dates, notices from financial institutions such as notices of overdrafts and late fees, and notices of flight changes. Because uncertainty surrounding the interpretation of the TCPA and the threat of litigation has caused businesses to become apprehensive about directly communicating with consumers, customer service initiatives and outreach have been negatively impacted.

  • The availability of high statutory damages has created the unintended consequence of incentivizing plaintiffs' attorneys to file frivolous TCPA lawsuits based on ambiguities in the TCPA and its implementing regulations. Between 2010 and 2015, there was a 948 percent increase in individual plaintiffs in TCPA litigation (including actions with multiple plaintiffs but not including class actions), with a 45 percent increase in individual plaintiffs between 2014 and 2015. In 2014, the average attorneys' fees for a TCPA class action settlement were $2.4 million while the individual consumer received $4.12. The stark disparity in the damages received by consumers relative to the fees received by plaintiffs' attorneys undermines the TCPA's consumer protection purpose.

  • Key TCPA language, such as the definition of "automatic telephone dialing system" (ATDS), has not been updated since the TCPA's enactment in 1991. As a result, there is tremendous uncertainty as to how modern communication technologies, including consumers' access to and preferred use of those technologies, fit into the statutory framework. In addition, the Federal Communication Commission's (FCC) TCPA interpretations have increased TCPA liability risk for legitimate businesses. For example, the FCC has interpreted the term "capacity" in the ATDS definition to include equipment that "lacks the 'present ability' to dial randomly or sequentially" but can be modified to provide those capabilities.

  • Despite the rapid development of mobile communication technology and consumers' widespread adoption of these technologies, the TCPA governs business communications from an outdated understanding of technology. The FCC should use its authority to modernize TCPA regulations in a way that will allow covered communications to be governed by a clear, fair, and consistent framework. (The white paper characterizes the Department of Education and White House recommendations that resulted in the TCPA's amendment to remove the prior express consent requirement for calls ''made solely to collect a debt owed to or guaranteed by the United States'' as recognition that "the ability to use modern communication technology is essential for reaching consumers in the contemporary marketplace." However, as we have observed, the FCC's proposed regulations implementing the amendment would significantly undermine its utility.)

As the white paper notes, the Senate Commerce Committee held a hearing on May 18, 2016, to consider whether the TCPA is still an effective tool to protect consumers from unwanted calls after 25 years.

Ballard Spahr's TCPA Task Force assists clients in navigating the complex and challenging issues that arise under the TCPA. The Task Force, which comprises regulatory attorneys and litigators, provides counsel on TCPA compliance and avoiding TCPA liability, including reviewing policies and practices and helping to design mobile text message and prerecorded and autodialed call campaigns. It also assists clients in commenting on regulatory proposals and handling scrutiny from regulators, including preparing for examinations, responding to investigations, and defending against enforcement actions. Task Force members also defend clients against TCPA class or individual actions.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).


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